The resulting price falls halved Toshiba's operating margin in its chip business to 4.8 percent in October-December from 10 percent in the previous quarter, and cut the unit's profit by 60 percent.

Toshiba is also fighting losses in its HD DVD player business. For the week that ended Jan. 12, Blu-ray hardware captured 90 percent of the market, according to data collected by the NPD Group, a market analysis firm.

Toshiba slashed prices on its players by 40 to 50 percent after Warner studio announced this month that it would release high-definition DVDs only in rival Blu-ray format. In addition, it said it would air a HD DVD commercial during this Sunday's Super Bowl. But the stock drop could force Toshiba's executives to revisit its investment in HD DVD.

For now, Toshiba believes that the strong sales for PCs, industrial systems and medical devices, as well as a boost from its newly-acquired U.S. nuclear power unit Westinghouse, would make up for shortfalls in microchips and HD DVD.